Late fees must be reasonable

Plain language

A late fee must be a reasonable estimate of the actual costs the landlord incurs from a late payment — it cannot be an arbitrary penalty. Unreasonably high or 'penalty' late fees are unenforceable.

Statute text

California treats rent late fees as liquidated damages: under Civil Code §1671 and case law, a late fee is only enforceable if, at the time the lease was signed, it was a reasonable estimate of the damages the landlord would actually suffer from a late payment (e.g., bank fees, administrative time). A fee set as a penalty to punish the tenant, or one that is disproportionate to actual costs, is generally unenforceable. The fee should be stated clearly in the lease.

Source